Our response to HM Treasury’s Payments Landscape Review
What’s next for UK payments and how we can improve the network for businesses and consumers?
Following a decade where payments went from back-office plumbing to supercharging fintech growth, the UK Government has asked for input on what should come next, in its Payments Landscape Review: Call for Evidence.In this blog, we outline our feedback on how to improve UK payments. Specifically, that:
- Better bank APIs and user journeys are the key to boosting payment initiation services.
- Open finance should be used to develop the UK payments network. This can be achieved by replicating the PSD2 ‘access right’ (as we also discussed here) and by mandating APIs outside the CMA9.
- Government and regulators should address barriers to entry for third party providers.
A decade of change in paymentsOver the last decade, huge improvements have been made to the UK’s payments network, through successful interventions by the Government, including:
- addressing bank ownership and control of the payment systems
- driving forward true faster payments
- creating an implementation entity for open banking
- implementing a new payments architecture
- The Electronic Money Regulations 2011
- The Interchange Fee Regulations
- The Revised Payment Services Regulations
1. Bank API performance is keyHM Treasury asks: does consumer protection for faster payments need to be improved to boost take-up of payment initiation and does this impact its competitiveness with card payments?We agree that consumer protection is vital to encourage the adoption of both faster payments and PIS. But there is already a clear framework for consumer protection and security under PSD2, and more safeguarding measures to come — the contingent reimbursement model code and confirmation of payee.PIS is also already inherently safe and secure:
- PISPs do not come into possession of funds
- Payments cannot be initiated without strong customer authentication at the user’s bank
- PISPs are not allowed to store user credentials (and do not store data such as card numbers which can be used to commit fraud)
- Unreliable bank APIs continue to have a knock-on impact on the ability of businesses to provide reliable and quality payment initiation services to users, and they make PIS less competitive as a payment option.
- Poor user journeys where users are redirected to their banks can cause customers to abandon making a payment (conversion is as low as 17% with some banks).
- Functionality is missing. For example, PIS cannot currently compete with card-on-file payments and direct debits, because the customer must be present for each payment – variable recurring payment APIs are needed to address this.